DX Update

DX is Working on a H&S Top for its Blue Rising Megaphone Before a Likely Pullback to the Bottom of the Red Megaphone

DX is Working on a H&S Top for its Blue Rising Megaphone Before a Likely Pullback to the Bottom of the Red Megaphone

DX broke through the top of a flat-topped megaphone back in mid-November, and then hung around without really taking off.  That usually means it’s turning the flat-topped megaphone into a conventional megaphone (orange on chart).

DX also needs to retrace to the bottom of its blue rising megaphone.

DX could be completing the top before the dip right now, or it could work its way higher in another leg up for a taller head on a H&S top for the head of a larger H&S for the blue rising megaphone.

Euro futures have confirmed a falling wedge bottom.

Euro Futures Falling Wedge Bottom

Euro Futures Falling Wedge Bottom

US Dollar (DX) Back at Top of Flat-Topped Megaphone

DX is Back at the Top of its Red Flat-Topped Megaphone and is a Favorite to Make Another Trip to its Bottom

DX is Back at the Top of its Red Flat-Topped Megaphone and is a Favorite to Make Another Trip to its Bottom

The DX has returned to the top of its flat-topped megaphone (red).

It has formed a rising megaphone (blue) to get up here.

That means it’s a strong favorite to complete a head and shoulders before a breakout from both the H&S and rising megaphone to return to the bottom of the red megaphone.

From there, the dollar can return to the top of the flat-topped megaphone for a breakout into a big move up, or it can break out through the formation bottom for a return to about 80.

Euro Futures and EUR/USD Pending Megaphone Retrace

Euro Futures and EUR/USD Need a Retrace to At Least the Blue Megaphone VWAP

Euro Futures and EUR/USD Need a Retrace to At Least the Blue Megaphone VWAP

Euro futures and  EUR/USD are likely completing wave 4 of the blue megaphone on the chart above.  They need a retrace from here to at least the blue megaphone VWAP at roughly 1.3820, have a high probability of retesting the parent megaphone’s VWAP at roughly 1.39, and could go all the way to the blue megaphone top at over 1.40.

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No Complete Bottoming Pattern Yet on Yen

Yen Futures have Retraced to VWAP of Their Overnight Megaphone, but Not Yet Formed a Bottoming Formation There

Yen Futures have Retraced to VWAP of Their Overnight Megaphone, but Not Yet Completed a Bottoming Formation There

Yen futures have retraced to VWAP of their overnight megaphone (red) but have not completed a bottoming pattern there.  (There’s a potential megaphone there, but it hasn’t broken out.)

Without a complete bottoming pattern, the yen may not be bottoming (and the SPX may not be topping).  Instead, the yen may be about to break through this level to complete the red megaphone as a continuation pattern (purple scenario).

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ES and Yen Worked on Megaphones All Night

Yen Futures are Still Working on a Megaphone Top

Yen Futures are Still Working on a Megaphone Top (USD/JPY on a Megaphone Bottom)

Yen futures are still working on a megaphone top (usd/jpy on a megaphone bottom).

Most likely they are working their way back to the orange and pink megaphone VWAPs for a small megaphone or H&S across that line.  If we see that, and the formation breaks out the bottom, that’s not only a set-up to short the yen (go long usd/jpy), it’s also a set-up to go long ES or SPY.

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How the Yen is Toying with the SPX

Yen Inverse H&S within Likely Megaphone

Yen Inverse H&S within Likely Megaphone

Yen futures (which are essentially the USD/JPY chart turned upside down) have formed an inverse head and shoulders (blue neckline) within a likely megaphone (red on chart).

The target of the inverse H&S, if it ever actually breaks out, is roughly the red megaphone top.  Since the yen has recently been inversely correlated with the SPX (USD/JPY strongly correlated), a yen trip to that red megaphone top would be bad for ES and SPY.

Yen Futures have been Inversely Correlated with the SPX

Yen Futures have been Inversely Correlated with the SPX

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Euro Breakout

Euro Futures & EUR/USD have Broken Out of Their Short-Term Megaphone (Pink)

Euro Futures & EUR/USD have Broken Out of Their Short-Term Megaphone (Pink)

Euro futures and EUR/USD have broken out upwards from their shortest-term megaphone (pink on chart above) and broken out upwards across VWAP of their longer-term topping megaphone (purple on chart).

That confirms a rising wedge on the daily chart (gray on chart below).

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